Microsoft Corporation (NASDAQ: MSFT) has announced that it will increase its dividend on December 9 to $ 0.62. The announced payout will bring the dividend yield to 0.8%, which is in line with the industry average.
See our latest analysis for Microsoft
Microsoft’s payment has strong revenue coverage
Unless the payments are sustainable, the dividend yield doesn’t mean much. However, Microsoft’s profits easily cover the dividend. As a result, much of what she earned was reinvested in the business.
Over the next year, EPS is expected to increase 7.8%. Assuming the dividend continues on recent trends, we think the payout ratio could be 29% by next year, which is in a fairly sustainable range.
Microsoft has a solid track record
The company has a strong history of paying dividends with very little fluctuation. The dividend went from US $ 0.64 in 2011 to the most recent annual payment of US $ 2.48. This implies that the company has increased its distributions at an annual rate of approximately 15% over this period. We can see that the payments have shown a very nice upward momentum without weakening, which gives reassurance that future payments will also be reliable.
The dividend seems likely to increase
Investors in the company will be happy to receive dividends for some time. We are encouraged to see that Microsoft has grown its earnings per share by 26% per year over the past five years. Rapid earnings growth and a low payout ratio suggest that this company has indeed reinvested in its business. If this continues, this business could have a bright future.
We really like the Microsoft dividend
Overall, a rise in dividends is always good, and we think Microsoft is a solid income stock thanks to its track record and growing profits. Profits easily cover distributions and the company generates a lot of cash. Considering all of this, this looks like a good dividend opportunity.
Market movements testify to the high value of a coherent dividend policy compared to a more unpredictable one. Still, there are a host of other factors that investors need to consider, aside from dividend payments, when analyzing a business. As an example, we have identified 2 warning signs for Microsoft that you need to know before you invest. Looking for more high yield dividend ideas? Try our organized list of big dividend payers.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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